Focus on Funds: Why This Rally Has Legs

Barron's Brendan Conway explains that transportation stocks are confirming the Dow's strength. Plus: The danger of REITs and the appeal of floating rate funds.

This transcript has been automatically generated and may not be 100% accurate.

I ... we did our record high the question now is in the good times keep on rolling and Jack Otter Editor Barron's dot com your Brendan Conway right to focus on Funds called ... so grand and ... I'll what he think are we seeing anything that suggests that the Dow might keep on going on ... we will inject one way for folks to consider this issue is ... if you believe him down theory ... so Dow Theory posits that ... on one hand you the Dow Jones Industrial Average and you also have the lesser known Index ... the Dow Jones Transportation Average ... these are real company's ... trucks ... the package delivery services ... you you you wanna see those two indexes confirm each other's groups of one reaches an all time high Susie on when ... the transports of actually been doing better than the Dow ... lately and so what you knew my dreams of that is well we've been times in the broader economy ... people are shifting things are ordering things are traveling ... that's a good sign so certainly if you believe the Dow theory on this has more room to run ... but that is that ... of course we can't be all stocks all the time I struggle might still have some of the fixed income Stephen portfolio ... of even talking a little bit about me it's very popular right now but they also carries dangers ... the straight jacket ... it has been a very high trade for a lot of portfolio managed on hers out there ... over the last year ... you know ... they they tell their clients who were most important of ... real estate for whatever reason is is not quite real estate it's essentially a a a legal structure ... that that that that that the firm is required to pay out most of its income came in for dividends ... this is actually ... probably the single hottest major asset class ... last year the Kiwi index rose about twenty percent because of the U S ... because of the deals right which now on many of those funds ... the yields are now around three or four percent ... and so folks have to do a trade off here ... is three or four percent really enough ... to weigh the risks to get there shoveling interest rate increase ... keep in mind ... a lot of these companies are highly leveraged that's how they pay out big dividends ... in so when rates rise your cost of borrowing does too ... investors can run for the exits ... so ... apparent VIX's honorees ... these are really smart guy don't be ahead of that trade on their own something else already done all the happy with the time of rising rates without it ... one of the Aries is getting a lot of attention right now sculpting loans ... PowerShares has one of the century there ... senior loans ... on ... their often floating rate write that that's what the key attributes of this theory is that is the Federal Reserve's suddenly decides to rising him to raise rates ... on last and only disaster is an ... even slower yet less of an issue for these investments now there's no such thing as a free lunch ... the downside here ... is that the clothes are less liquid in you know that if there's a general market selloff that the carrying costs ... these things are victory will say on troubling them that's right and you have download them at or above is the Amy you know you invariably the general